Rubber Production to Gain 8% in 2011, Association Predicts

Rubber Production to Gain 8% in 2011, Association Predicts


Output of natural rubber from so- called key producing countries is forecast to grow 8 percent to 10 million metric tons in 2011, the Association of Natural Rubber Producing Countries said in a monthly bulletin. The group’s members account for 92 percent of global production.
Natural-rubber supply from key growers may expand 6 percent in the first quarter as high prices attracted farmers to tap trees during the low-output season, the bulletin said.
Demand for natural rubber in China, India and Malaysia, which account for 48 percent of global usage, is expected to increase this year, the bulletin said. Demand in China, the largest user, may gain 9.1 percent to 3.6 million tons; India’s usage may gain 5 percent to 991,000 tons and consumption in Malaysia may rise 7 percent to 490,000 tons.
Rubber futures in Tokyo have gained 15 percent this year, extending last year’s 50 percent rally, as rising car sales led by China and India boost demand. The price reached an all-time high of 537.7 yen per kilogram on Feb. 18.



CII advocates for investment in rubber sector of Tripura
Agartala, Feb 25 : Confederation of Indian Industry (CII) strongly advocated for investment in Tripura rubber sector considering the strategic location of the state with upcoming linkage with Chittagong port of Bangladesh, which would make the state as gateway to South East Asia market.
Speaking at the Tripura Rubber Convention here today, Senior Director and Head of Development Initiatives, CII, Indrani Kar said that the business opportunities for setting up rubber processing units in Tripura had bright future because of recent bilateral agreements between India and other neighbouring countries.
''The convention focused on making rubber industry a catalyst in improving the socio-economic set up of the down-trodden grower and business communities that enabling investors to consider Tripura as an important destination and access to intermediary and cost effective processing technologies,'' Ms Kar underlined.
In view of the area under plantation together with the growth positional and rubber production trend, Tripura had become as second rubber capital of the country and the development of Rubber Park near Agartala had also boost the value addition of natural rubber at highest degree, Mr Kar pointed out.
She, however, asserted that CII was already in the process to tap export market of Bangladesh, Myanmar and other South Asian countries for Tripura rubber and there were ample opportunities of foreign investment in rubber sector, as Tripura has various subsidies on investment including cent percent excise duty exemption.



NMCE Rubber tumbles on short selling
NMCE rubber futures extended the bearish trend on strong selling interest for 5th consecutive session on Thursday. On opening itself prices traded down on heavy selling pressure. TOCOM rubber futures also traded down settled on negative note at ¥ 473 per Kg. on strong selling pressure.
Rising economic tension in Middle East further added to the down side. Domestic spot market further fell by `300 per quintal. Thus, on cues from domestic and international market NMCE rubber futures ended on negative note.
The rubbers futures are projected to witness volatility today on overall bearish sentiments prevailing market. However, prices are likely to show small recovery today on short covering.
TOCOM rubber July futures are trading slightly lower at ¥ 477.90 per Kg. Moreover, Middle East concern are now easing down which may support the prices to give a pull back. Thus, on cues from above stated factors rubber futures are likely to witness a recovery today however overall trend will remain weak.
Factors to Watch For
The stock of natural rubber in the country till January 30, 2011, is estimated at 3,27,115 tons, according to chairman of Rubber Board of India
According to the Rubber Research Institute of Thailand, the physical price of Thai rubber dropped 0.9 percent to 195.80 baht ($6.42) a kilogram yesterday
People’s Bank of China has increased the interest rate by 50 basis which is pressurizing the rubber prices as China is the largest consumer of natural rubber
Natural-rubber inventories monitored by the Shanghai Futures Exchange is reported around at 58,058 tons, which is down by 62 % from last year’s highest inventory levels of 151,832 tons
According to the Association of Natural Rubber Producing Countries, Natural-rubber consumption in China and India may rise 9 percent to 3.6 million tons this year and 5.2 percent to 991,000 tons respectively
According to Passenger Car Association, passenger-car sales increased 16.2 percent Y/Y to 1.53 million last month
DERIVATIVE ANALYSIS
Indian Futures (NMCE)
The NMCE February contract, prices, volumes and open interest all are falling. If the total open interest is falling off and prices are declining, the price decline is being caused by disgruntled long position holders being forced to liquidate their positions. Technicians view this scenario as a strong position technically because the downtrend will end as all the sellers have sold their positions, creating fresh buying opportunity at lower levels.
Japan Futures (TOCOM)
The TOCOM active June contract, prices, volumes and open interest all are falling. If the total open interest is falling off and prices are declining, the price decline is being caused by disgruntled long position holders being forced to liquidate their positions. Technicians view this scenario as a strong position technically because the downtrend will end as all the sellers have sold their positions, creating fresh buying opportunity at lower levels.
Shanghai Futures (SHFE)
The SHFE active June contract, prices are falling while volumes and open interest are rising. If prices are in a downtrend and open interest is on the rise, chartists know that new money is coming into the market, showing aggressive new short selling. This scenario will prove out a continuation of a downtrend and bearish conditions.




Thai rubber exports in 2011 seen to double in value on soaring world price: Official

POTENTIAL OF THAI NORTHEASTERN REGION
Rubber plantations, traditionally seen only in the south of Thailand, have in recent years sprung up in the northeastern region of the country.
And Luckchai, whose Thai Xua started planting rubber trees in the northeast in 1995, saw a high potential of this region, the driest and poorest of the country.
He said 41,600 square kilometers of land in the northeast could be used for planting rubber trees, while currently only less than 11.5 percent, or 4,800 square kilometers, are of rubber plantations.
He believed that because of the attractive price, more farmers in the northeast would turn to plant rubber trees.
"I'm confident that the northeast has a high potential," the president of the Thai Rubber Association said. "Perhaps in the next 20-30 years, this region could become a bigger producer than the south."
Demand of rubber surged in particular from its usage to produce auto tires in China, which consumes 27 percent of world's demand.
Luckchai, whose Thai Hua trades rubber with China, said the Chinese consumption rose to three million tons in 2010, the world' s largest now, from about 1.1 million tons in 2001.
Global demand of natural rubber in 2011 is estimated at 11 million tons.
Luckchai said China superseded the United States as the world's largest rubber consumer in 2001, when its demand exceeded one million tons while that of the U.S. dropped below that mark.
"If Chinese demand continues to grow by leaps and bounds like this, the production will remain insufficient," he said.
And the world's production -- 70 percent of which comes from the big three producers, which are Thailand, Indonesia and Malaysia -- is under even higher pressure from the surging economy of India.
"If the Indian economy continues to grow like the Chinese, or just half of its pace, the production will become even more inadequate," Luckchai said.



NMCE Rubber fall to continue
FRIDAY, FEBRUARY 25, 2011
AHMEDABAD (Commodity Online): Rubber is in primary uptrend but it has made triple top on its daily chart near 24790 and today Rubber has broken its strong support of 22200 at NMCE, the bourse where Rubber is a major commodity to reckon with.
Rubber opened 21900 and after making high of 22999 it is currently trading near 22000. Rubber looks weak and prices are expected to correct which has support around 20680.
“Technically, Intraday traders can sell rubber below 21700 with the stop loss of 21950,” said Bharti Navlani, Technical analyst with Commodity Online.




Plan for rubber tree replanting

PUTRAJAYA: The Plantation Industries and Commodities Ministry will propose to the cabinet for the replanting of 40 ha rubber trees per year to meet strong demand.
Its Minister Tan Sri Bernard Dompok said his ministry would also propose 13,000 ha of new plantation annually to increase rubber production.
“We are trying to increase the production of rubber by replanting,” he said after the exchange of agreements between Malaysian Rubber Board (MRB), Felda Rubber Industries Sdn Bhd and Mardec Bhdyesterday.
“We will propose the plans to the cabinet as soon as possible and hopefully get a concrete decision before the end of next month,” said Dompok.
Malaysia currently has 1.2 million ha of rubber plantation, of which 80% is in production.
Dompok said the country now produced less than one million tonnes of rubber a year.
He hopes to double the production to two million tonnes by 2020.
Earlier in his speech, Dompok said Felda Rubber Industries and Mardec have been selected as recipients of technology transfer and commercialisation for two advanced rubber products – ekoprena and pureprena – developed by MRB.
He said the commercialisation would enable both Felda Rubber Industries and Mardec to produce ekoprena and pureprena with an initial capacity of 12,000 tonnes a year and up to a target capacity of 300,000 tonnes annually by 2020.
He said the project was expected to result in gross national income totalling RM1.3bil and create 1,000 jobs by 2020.
Ekoprena is a form of epoxidised natural rubber obtained by the epoxidation of natural rubber latex.
Dompok said ekoprena, an established class of specialty rubber, was regarded as a green material for rubber product-manufacturing industry, particularly in tyre-making sector, as it was produced from a renewable natural source.
Pureprena is a highly purified natural rubber and an eco-efficient form of deproteinised natural rubber with distinguised raw rubber properties for dynamic and engineering applications.




Tokyo Futures Ease On Profit-Taking Supply Worry Supports
FRIDAY, FEBRUARY 25, 2011

Key Tokyo rubber futures fell on Friday (Feb 25) as investors took profits after recent high prices, but supply concerns continued to provide support.
The benchmark rubber contract on the Tokyo Commodity Exchange for August delivery, which debuted on Wednesday (Feb 23), fell 3 yen or 0.6 percent to 475.8 yen per kg as of 0029 GMT.
The contract fell as low as 469.3 yen on Thursday (Feb 24), the lowest since Feb. 2.
The most active Shanghai rubber futures for May delivery closed on Thursday (Feb 24) at 38,355 yuan per tonne, down from Wednesday's (Feb 23) close of 39,530 yuan. The contract hit a record high of 43,500 yuan on Feb. 9.
U.S. crude futures were up on Friday (Feb 25). Brent crude sank from 2-½ year highs near $120 a barrel in strong, late-day profit-taking following an unsubstantiated rumour Muammar Gaddafi had been shot and Saudi Arabia's assurances it can counter Libyan supply disruptions.
The dollar nursed heavy losses early in Asia on Friday (Feb 25), hovering above a record low versus the Swiss franc as investors sought safety in other currencies on fears the unrest in Libya will spread to other oil producers.
(Reuters, February 25, 2011)



Tyre Companies Appeal For More NR Imports in India
FRIDAY, FEBRUARY 25, 2011

The tyre industry has appealed the finance minister for import of 200,000 tonnes of natural rubber (NR) in 2011-12 in order to bridge the gap between domestic consumption and production in India. In a pre-Budget submission to the finance minister, the Automotive Tyre Manufacturers Association (Atma) has also demanded customs duty waiver on raw materials like butyl rubber and styrene butadiene rubber (SBR), which are not produced domestically.
It has also demanded reduction in customs duty on raw materials where domestic supply is short of demand, like steel tyre cord, rubber chemicals and polyester tyre cord.
At present, butyl rubber attracts a duty of five per cent and other raw materials which are not produced in India attract a duty of 10 per cent.
Steel tyre cord total domestic production is 10,000 tonnes while its consumption is 25,000 tonnes. Nylon tyre cord production is 63,695 tonnes, while the demand is 115,000 tonnes and 35,000 tonnes of rubber chemicals are produced in the country while demand is 42,000 tonnes. So the tyre industry is in serious trouble due to the low availability of raw materials and its steep price rise.
The industry is raw material intensive and this accounts for 62 per cent of the total industry turnover and 70 per cent of the total production cost. NR accounts for 42 per cent of the total raw material cost.
The percentage increase in the price of NR during the last six months was 41 per cent and even at the record price level the industry finds it difficult to get rubber.
The current price of RSS-4 grade rubber is Rs 238 a kg. Atma also pointed out that the net profit of the tyre companies is on the decline and expected to slide further in the last quarter of the current financial year.
The net profit as a percentage of net sales has come down from 6.39 per cent in October-December period of 2009 -10 to 3.14 per cent in the same period of the current financial year. The industry has a turnover of Rs 30,000 crore with an export basket of Rs 3,600 crore.
Reuters adds: Global tyre makers bought some quantity of Indonesian rubber and demand from trading houses in Southeast Asia also stirred up trading, but main consumer China was on the sidelines although physical prices had dropped from record highs, dealers said on Thursday (Feb 24).
Indonesian SIR20 was traded on Thursday (Feb 24) at 244 US cents a pound ($5.38 a kg) for May shipment. Late on Wednesday (Feb 23), SIR20 for April delivery changed hands at 245.00 and 246.50 cents a pound ($5.40 and $5.43 a kg), with buyers including Japan's largest tyre maker Bridgestone.
(Business Standards, India, February 25, 2011).



Sheet rubber declines on buyer resistance

KOTTAYAM, FEB. 24:
Domestic rubber prices continued to remain under pressure on Thursday. In spot, prices dropped further on buyer resistance amidst selling from dealers and growers. According to sources, the market seemed to be experiencing a visible improvement in arrivals as the prices began to slip beyond expectations. Scattered rain during the past couple of days prompted growers to sell at least a part of their stocks expecting extended tapping days.
Sheet rubber declined to Rs 225 (230) a kg, according to dealers. It closed weak at Rs 228 (231) a kg, as reported by the Rubber Board.
In futures, the March series surrendered to Rs 219.80 (228.95), April to Rs 229.51 (239.07), May to Rs 235.26 (245.06), June to Rs 241.27 (251.32) and July to Rs 241.92 (252.00) a kg for RSS 4 on the National Multi Commodity Exchange.
The volumes totalled 21384 lots and open interest 11494 lots. The turnover was Rs 486.94 crores.
RSS 3 (spot) slipped further to Rs 288.02 (289.31) a kg at Bangkok. The March futures for the grade inched up to ¥515 (Rs 286.25) from ¥514.4 during the day session but then remained inactive in the night session on the Tokyo Commodity Exchange.
Spot rates were (Rs/kg): RSS-4: 225 (230); RSS-5: 222 (225); ungraded: 218 (220); ISNR 20: 227 (230) and latex 60 per cent: 143 (145).



Tokyo futures hit three-week low
FRIDAY, FEBRUARY 25, 2011

Bangkok (february 25, 2011) : tokyo rubber futures fell 1.7 percent on thursday as investors continued to take profits from recent record highs, but tight supply and strong oil prices should provide support, dealers said. the benchmarkrubber contract on the tokyo commodity exchange for august delivery fell 8.5 yen to settle at 478.8 yen ($5.80) per kg. it fell as low as 469.3 yen, the lowest since february 2.
"there was another round of profit-taking as players as well as investment funds thought that the market was overbought," one dealer said. but dealers said rubber prices could recover on friday after prices found strong support at 475 yen per kg, and tight supply in producing countries should provide fundamental support. oil prices hit a fresh 2-1/2-year peak on thursday on concern the bloody unrest that has cut more than a quarter of opec member libya's crude output could spread to other major producers, including top exporter saudi arabia.



Dip in rubber futures won't grow into a correction
FRIDAY, FEBRUARY 25, 2011

A slip in rubber futures, which extended to 12% their tumble from last week's record high, does not herald a correction, as strong growth in Chinese and Indian car sales erodes stocks further this year.
Commerzbank analysts forecast rubber prices will "likely remain at a high level", noting that 2011 looked set to be the fourth year in the last five in which demand for the tyre ingredient will exceed production.
At Phillip Futures in Singapore, Ker Chung Yang said a fall in Tokyo's benchmark August rubber contract, which fell to a three-week low of 473.00 yen a kilogramme in Thursday's afternoon session, was viewed as "healthy" in the market, given that the commodity had been technically overbought.
"Since fundamentals have not changed much with major producer Thailand in the wintering season, Tokyo rubber may retest 500 yen a kilo again," Mr Ker said.
The fall in rubber futures also appeared to contradict usual market logic in which prices move in line with oil, the raw material for synthetic alternatives.
However, high oil prices, which for Brent crude topped $117 a barrel on Middle East unrest, could also dent the demand for cars which has driven rubber's rally of more than 60% over the last six months.
Supply gap
Indeed, Commerzbank's assessment was based on estimates from the International Rubber Study Group that demand will rise by 4.6% to 11.2m tonnes this year, as demand for vehicles soars among Asia's enriched consumers.
Chinese carmakers expect sales growth of 10-15% in domestic sales this year, with Indian peers forecasting a 23% rise their production.
Rubber consumption in these countries will grow by 9% and 5.2% respectively, the Association of Natural Rubber Producing Countries believes.
Meanwhile, the association believes that output among its members, which account for the great majority of world production, will rise by 4.8% to a little under 10m tonnes, held back by heavy rains brought by the La Nina weather pattern.
The supply squeeze is being exacerbated at the moment by the entry of Thailand, the top producer, into a seasonal downturn, which last under April, when rubber trees shed their leaves and latex volumes fall to half peak levels.
"No news which would ease the situation is evident on the supply side, at least for the moment," Commerzbank said.
'Significant margin pressure'
The comments will lower hopes for tyremakers of a relief from the rise in raw material costs which Goodyear blamed for driving it into a fourth-quarter loss.
French rival Michelin two weeks ago said that rising rubber costs would have a E1.5bn impact on operating income by this year, although it expected to recoup most of this through higher product prices.
Nonetheless, Fitch Ratings, in a report earlier this week, warned that tyremakers faced "significant margin pressure".
"Even after factoring in limited substitution of synthetic rubber in the tyre-making process, further tyre price increases appear necessary in 2011," Fitch analysts said.



Tyre cos seek 2 L tonne duty-free rubber import
FRIDAY, FEBRUARY 25, 2011

The tyre industry has asked for duty-free imports of 2 lakh tonne of natural rubber (NR) for 2011-2012 to bridge the gap between demand and supply.
“We estimate the demand-supply gap in domestic natural rubber production and consumption to be approximately 2 lakh tonne in next fiscal (2011-12). Therefore, we want the government to allow duty-free import of natural rubber to the bridge the gap between domestic NR availability and consumption on a regular basis”, Neeraj Kanwar, chairman Automotive Tyre Manufacturers Association (ATMA), said.
ATMA has also sought waiver of customs duty on all raw materials not manufactured domestically. These include butyl rubber, ethylene propylene non-conjugated diene rubber (EPDM) and styrene butadiene rubber (SBR).
Regarding other key raw materials including PBR, steel tyre cord, nylon tyre cord, rubber chemicals and polyester tyre cord, ATMA has suggested lowering of import duties. “The domestic shortfall on these items ranges from 20% to 60%, making imports inevitable”, Kanwar says.
Raw material cost accounts for about 62% of tyre industry turnover and 70% of the production cost. According to ATMA, measures to improve raw material availability need priority. ATMA also urged the finance minister to end “the unfair trade practice of dumping tyres by increasing customs duty on imports.
In the recent years, there has been a large scale import dumping of tyres from China. “Though basic rate of customs duty on tyres is 10%, tyres can be imported at a lower rates of customs duty under various regional trade agreements. For instance tyre imports from China and South Korea account for over 70% of total tyre imports into India since the effective rate of basic customs duty works out to only 8.6%. The truck and bus tyre imports have gone up by around 35 % in 2010-11 over 2009-10 when calculated on annualised basis. In case of passenger car tyres, the imports are up by around 40% during this period.
“We count on the coming Union Budget to jack up the customs duty rates on tyre imports to stop the dumping of Chinese tyres,” says Kanwar.




Car Prices May Rise Up To Rs 25,000 Due To Higher Commodities Costs in India
FRIDAY, FEBRUARY 25, 2011

Car companies are likely to raise prices by up to 2-3% next month, translating into an effective increase of around 10,000 for cars such as Maruti Swift , Hyundai i20 and Honda Jazz in India. The premium models like Toyota Camry or Skoda Superb will be costlier by over Rs 25,000.
"There is immense pressure to increase prices as key commodities like steel and rubber have touched all-time high in recent months. While the negotiations for our new long-term supply contract are underway, suppliers are quoting much higher prices," S Maitra, managing executive officer (supply chain) Maruti Suzuki said.
The company had raised prices by up to 2.4% in January for most of its cars to contain increasing input costs.
The auto sector has seen major rise in raw material costs as high consumption commodities such as steel, rubber, aluminium, copper, nickel have gone up in the range of 20-45% in November-February months over the same period last year. Hit by higher commodity prices, Automobile majors such as Maruti Suzuki and Hero Honda posted 20% decline in year-on-year net profit for the October-December quarter.
Other companies are also toying with the idea even if they are not willing to comment officially on price hike. "We haven't taken a final call yet, though input cost pressures are going beyond our control," a senior executive of Hyundai Motor India said.
The Japanese carmaker Toyota Kirloskar Motors would review the price next month. "We evaluate our price position on three-month basis and any price rationalisation could happen only next month," Toyota Kirloskar deputy managing director (marketing) Sandeep Singh said.
The price indications come at a time when the government itself is contemplating a 2% hike in excise duty across the auto sector to take it to the pre-stimulus level of December 2008. The government's decision to hike excise will automatically force all auto companies to pass on the cost to customers in the same ratio.
(The Economic Times, India, February 25, 2011)